You may spend months building a California business succession plan, only to have a named successor later decline the role. Start by reviewing the company’s governing documents and determine whether the succession plan covers management, ownership or both.
Review your governing documents
Your company’s governing documents may address what happens if a proposed successor declines the management role or does not complete the planned ownership transition. These rules may explain how to designate an alternate successor or begin an ownership. If the governing documents do not include a backup plan, you may need to amend them using the procedure required for your business and entity type.
Identify alternate candidates within your organization
Look for people who already know the business and share your goals. A senior manager or longtime employee may be a potential management successor, while an ownership transfer may require separate financial, contractual and legal planning.
Consider outside succession options
If no one inside the company is ready, an outside buyer or management group may be an option. A private equity buyer may acquire the business and, depending on the deal, retain some existing managers or employees. You may also decide to sell to a competitor or industry buyer, subject to the transaction’s valuation, confidentiality requirements and other applicable restrictions.
Business counsel can help you structure the transaction and update the governing documents. They can also help you prepare for other changes you did not expect.
Build primary and alternate succession options
Naming primary and alternate successors can provide a defined backup if your first choice declines the role. You can also build flexibility into the timing of the transfer. Review the plan often so you can spot problems before they slow down your exit.
A written backup plan makes it clear who takes over if your first choice cannot. A California business lawyer can help you update your plan so your documents are accurate.